Company Case: Zara: The Technology Giant of the Fashion World Identification of the Problem/s or Issue/s
Zara, a Spanish-based chain owned by Inditex, is a retailer who has taken a new approach in the industry. By owning its in-house production, Zara is able to be flexible in the variety, amount, and frequency of the new styles they produce. With their unique strategy, Zara has the competitive advantage to be sustainable. In order to maintain that advantage and growth they must confront certain challenges that face traditional retailers in the apparel industry such as Hennes and Mauritz (H&M) and The Gap, who differ from Zara because they outsource all of their production, spend more money on advertising, and is price-oriented. Although Zara has a successful business model that differs from that of traditional retailers, it also has problems that can affect its sustainable growth. Due to its centralized logistics model, Zara’s weaknesses also differ from the traditional retailer. Zara holds big percentages of Inditex’s total international sales, which are a significantly high number for an organization. With that, Inditex is putting all of their eggs into one basket by sinking a great deal of capital into Zara. Inditex has contributed their extensive international sales to Zara. If Zara fails in the future, Inditex will have to totally re-formulate their firm’s strategies and may possibly face an internal meltdown. Situation Analysis
Zara is a highly internationalized company with a deep level of vertical integration. The operations are becoming more and more complex with multiple sources of production and assembly that goes to one centralized distribution system. But Zara has not invested in distribution facilities in the Americas, which is a threat to their U.S. selling abilities. They may not be able to supply more retail locations due to their centralized logistics model. At this stage, Zara is not equipped to increase complexity by expanding...
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